The Dollar Index trades just beneath 99.00 and unchanged on the session, with the entire day fitting inside 35 pips between the 98.50 area and a high that stopped a shade short of the handle.
That leaves the index at its weakest since May, at the end of a week in which US long-end yields went up rather than down
A currency whose government bonds are repricing to higher yields is supposed to attract capital rather than repel it, and for most of this cycle the Dollar Index has traded exactly that way. This week broke the arrangement in both directions. The index fell hard on the day the Treasury tried to force yields lower, then took none of it back when the market forced them straight up again.
Both branches of the fiscal trade sell the Dollar Wednesday’s announcement doubling liquidity-support buybacks in longer-dated coupons, from 2 billion Dollars an operation to at least 4 billion, knocked nine basis points off the thirty-year and took the Dollar Index down close to a point in a single session. By Thursday the bond move had fully reversed, with the thirty-year back above 5.25% and the ten-year above 4.70%. The currency reversed nothing.